Home / Markets News & Opinions / Housing Market / Here’s Where the Red-Hot Housing Market Is About to Plunge
Housing Market
4 min read

Here’s Where the Red-Hot Housing Market Is About to Plunge

Last Updated September 23, 2020 2:20 PM
Josiah Wilmoth
Last Updated September 23, 2020 2:20 PM
  • U.S. home prices recovered at a blistering pace in June.
  • CoreLogic expects price growth to slow nationally, with overall headwinds punctuated by steep losses in individual metros.
  • One local housing market could see prices plunge more than 10% over the next 12 months.

The U.S. housing market didn’t just close out the first half of the year on a high note. It pierced an octave the real estate sector hadn’t broached for the better part of a decade.

Housing Market Fever Hits a New High – But It’s About to Break

We already knew home sales had rebounded forcefully  in June, blowing past economist forecasts and previous-year levels alike. This week we learned that home prices enjoyed a blistering recovery  too.

According to CoreLogic data, U.S. home prices rose a full 1% in June, recording their biggest monthly gain over May levels since 2013. Even with pandemic headwinds, the national housing market has seen prices jump 4.9% annually.

Video: The U.S. housing market has reached a fever pitch

CoreLogic economists say “housing remains a bright spot” for an otherwise shaky economy, but that doesn’t mean the surge in home prices is sustainable.

They expect prices to fall around 1% nationally over the next 12 months. And they warn that in some local housing markets, the damage is going to be a lot worse.

Here’s Where Economists Say Home Prices Are About to Fall

housing market, home prices
Home prices are set to fall nationally, with some individual housing markets suffering the brunt of the damage. | Source: CoreLogic 

CoreLogic identified five metropolitan housing markets as prime candidates for a plunge:

  • Prescott, AZ
  • Peoria, IL
  • Las Vegas-Henderson-Paradise, NV
  • Lake Havasu City-Kingman, AZ
  • Worcester, MA-CT

The company’s HPI Forecast report flagged all five metros as having a “very high” risk of a price decline. Each has a confidence score of more than 75%.

And these local price declines may outstrip national trends by a considerable margin.

Take the Las Vegas-Henderson-Paradise metro. After rising 3.5% over 2019 levels, prices in Nevada’s largest housing market are teed up for an 11.3% meltdown over the next 12 months.

las vegas housing market, home prices
Home prices in the Las Vegas metro area have surged since the U.S. emerged from the financial crisis. CoreLogic economists warn prices in the area are about to suffer a big plunge. | Source: Zillow 

That could be a startling wake-up call to would-be homebuyers and sellers alike.

Local reporting on the Las Vegas market  claims desperate house-hunters are engaging in costly bidding wars – and “sellers are smiling all the way to the bank.”

Why the Pandemic Will Help Some Local Housing Markets – And Cripple Others

Research from home co-investment company Unison found that although the national housing market has appeared remarkably immune to the pandemic, the picture is more complicated at the local level.

Individual market trends have largely been tied to the health of the industries that drive the area’s economy – and the security of employment in those sectors.

how the pandemic is affecting the housing market
The pandemic’s outsized effect on specific industries will cause some local housing markets to suffer more than others. | Source: Unison 

Unison’s Resilient and Vulnerable Cities report  flagged Las Vegas as the nation’s most vulnerable housing market. Given the area’s heavy concentration of construction and leisure & hospitality jobs, the report estimates 62.6% of local workers are employed in at-risk industries.

Industry-specific employment considerations factor heavily into CoreLogic’s forecast too, but their economists highlight another risk to local housing markets: the pandemic itself.

They predict metro areas with an “elevated resurgence of COVID-19 cases” are more likely to suffer price declines in the year ahead. That explains why two Arizona markets – Prescott and Lake Havasu – face a “very high” risk of an incoming downturn.